Brexit – How the Uncertainty Impact the economy?
United Kingdom’s decision to exit the EU (European Union) has impacted the economy in a major way. In fact, UK’s decision will also impact the EU and US as well as the remaining world in several ways. As far as UK is concerned Brexit will likely drag the nation’s economy down as more and more organizations have halted their plans to spend further. This has also raised the risk of future job losses whereas the economy has become more dependent on the consumers continuing their spending, even as businesses have chosen to pause their spending.
While, UK is preparing for no-deal exit, BoE policymakers believe that the country’s economic future does not look very bright. UK’s unemployment figures for the last few months ahead of Brexit have been extremely low since the middle of 1970s. In fact, over 10,000 jobs in Britain’s car manufacturing industry are at risk due to no clarity around future trade relationships as well as shifting global automotive trends. On one hand, Honda-the Japanese car designing/manufacturing company has announced to shut down its plant in Swindon, Ford as well as Jaguar Land Rover have also stated that they will cut down jobs in the UK. Shutting down of plants will not hit the jobs but also lower the salaries of employees who continue to work.
Experts are also of the opinion that no-deal exit could put Britain’s economy in a recession, while blowing their public finances apart. UK firms have also witnessed a drop in new factory orders, which they have attributed to both the Brexit as well as the wider global economic slowdown.In addition to this, the massively swinging rates of exchanged coupled with higher uncertainties around policy making have dealt a blow to the exporters in Britain. They are now uncertain about their future earnings as well as investments. This has also reduced their willingness to invest any further. In fact, the policy uncertainties will also affect the consumers who are currently dealing with low incomes.
It must be noted that UK’s economy has grown only by a mere 0.2percent in the last 3 months of the year 2018. In fact, the 4th quarter numbers revealed that there was a sharp slowdown, with Britain’s economy recording a drop of 0.4percent in the month of December. Also, investments from business have entered its weakest period with the advent of financial downturn with previous year’s corporate spending falling for four quarters successively, causing the economy to record slower growth in the future.
By André Lazzuri